§ Mr. Doug Henderson (Newcastle upon Tyne, North)
I beg to move amendment No. 3, in page 1, line 31, at end insert:3A. Section 38 (Restriction on agreements excluding provisions of Part II) of the 1954 Act shall be read and have effect as if there were added the following subsection—'(5) Paragraph (a) of subsection (4) of this section shall not apply where the tenancy to be granted is to be of premises licensed for the sale of intoxicating liquor for consumption on the premises, except where the holding of the licence is merely incidental to another purpose.'.The purpose of this amendment is to outlaw the practice of contracting-out in the relationship between brewers and their pub tenants. The Bill relates to the Landlord and Tenant Act 1954, which concerns the relationship between a landlord and a tenant in the case of a shop or other commercial premises. The 1954 Act, which was modified by the Law of Property Act 1969, includes a provision that allows landlords and their tenants to agree mutually to contract-out. The terms of the 1954 Act are defensible in the context of the circumstances that existed then. The country was trying to rebuild its economy at a time when many urban areas were shattered in the aftermath of the second world war and at a time when many suburban areas had been broken up and were trying to revitalise themselves, against quite difficult odds. At that time the House felt that it would be constructive to have in the 1954 Act a provision giving some more leeway than might otherwise have existed in relation to contracts between landlords and their tenants. In a sense, it was a question of allowing tenants to try to establish businesses in those difficult circumstances without being hamstrung by regulations and rules that probably were not required.
Of course, those tenants had many oportunities to locate in other areas nearby. At that time the House felt that where a landlord and his tenant were of the opinion that they could benefit mutually by coming to their own contractual arrangements, rather than by being tied by the strict terms of the Act, it was permissible for them, provided that they applied to the court, to be contracted-out of the specific terms of the Act.
The big difference between the position then and the present situation is that there is not now the same shortage of business accommodation. In many of the areas, especially urban areas, in which pubs are located there is sometimes a glut of accommodation. That rather tilts the balance of power in favour of the landlord and leaves the tenant exposed to the vagaries of the marketplace. In 26 addition, in the case of the brewery, the landlord often is not only the body owning the public house, which is at the retail end, but the organisation that dictates the nature of the product retailed in those premises dictates the conditions under which the product is retailed, and dictates the general environment in which it is retailed. I refer to such things as amusement machines, pin-ball games, and so on, all of which are often controlled by the landlord. So, in the beer industry, the relationship between landlord and tenant is quite different from that which generally pertains between landlord and tenant in the case of an ordinary commercial business.
I hope that the House acknowledges that distinction, because it was certainly felt in Committee that it exists. I hope that right hon. and hon. Members will acknowledge also that it is not a simple relationship between a brewery landlord and a tenant but one that requires special consideration not always consistent with that given to the usual relationship between a landlord and tenant.
The nature of the relationship is essentially why the Monopolies and Mergers Commission identified that a complex monopoly exists. It is not a monopoly simply between one brewery and a number of retailers, but a complex monopoly among brewers and retailers. The question is whether the Bill provides the necessary and proper balance in the relationship between the brewery and a pub tenant. That is the guts of the Bill. Is the balance right?
I am sure that the House accepts that the relationship cannot be one way. If it is tilted too far in favour of the landlord, inevitably it will serve as a disincentive for landlords to establish a relationship with potential tenants. If it is tilted too far in favour of the tenant, that will discourage landlords. That argument is accepted by the National Licensed Victuallers Association, and I share its view that it is crucial to strike the right balance.
If the House does not accept the amendment, the important goal of achieving the right balance will not be met. Brewers are a powerful body of people and a powerful lobby. They will inevitably place undue pressure on tenants to exclude themselves from the terms of the Bill. If it is possible for brewers to reach a bilateral arrangement not covered by statute, and if they feel it is in their interests to seek such an agreement, it is only human nature that they will do so. If the amendment is not accepted, the balance of power will be tilted too far in the brewers' favour, and they will then be able to exercise too much power over prospective tenants.
If the Bill was not sympathetic to brewers, the Brewers Society, which is a powerful lobby, would have lobbied right hon. and hon. Members every day between the Committee stage and Report to ensure that the brewers' case was heard. I have heard of no lobbying of any significance in the weeks between the Committee stage and now. Compare that silence with the £6 million campaign that the Brewers Society conducted against the MMC's report and recommendations of 1988 and 1989. Although the Bill appears on the face of it to sympathise with the tenant and to be balanced, in fact it is tilted very much in favour of the brewery. The amendment is crucial if we are to give the legislation teeth.
There is no doubt in my mind that brewers will put the heat on potential tenants.
§ Mr. Don Dixon (Jarrow)
Is it not a fact that the brewers have already exerted pressure on hon. Members? 27 A programme was recently shown on television, either on Channel 2 or 4, in which the hon. Member for Beverley (Mr. Cran) was quoted as saying that pressure had been put on him and his colleagues by the brewers since the Monopoly and Mergers Commission report had been published. If they can put that sort of pressure on independent Members of Parliament, can my hon. Friend imagine the amount of pressure that they can put on tenants who rent houses from the brewers?
§ Mr. Henderson
I am grateful to my hon. Friend for mentioning that point. I might have been more grateful if he had not raised it, because he has stolen it from my text. However, this is a real worry, and I recall the submission made by the hon. Member for Beverley, who said that he felt that many Conservative Members had had to face great pressure from the Brewers Society which wanted them to defend its position, to defend the brewers and to examine the legislation with that borne carefully in mind.
My hon. Friend the Member for Jarrow (Mr. Dixon) has made an important point. If hon. Members find it difficult to face up to the power of the brewers' lobby —and there was ample evidence of that being the case from the reaction of many hon. Members to the original proposals of the Monopolies and Mergers Commission —what chance does the tenant of a pub have against the might of the brewers?
Later in my contribution I hope to give examples of the changes that are taking place in the industry which may cause undue pressure to be put on tenants. Some of the changes in the industry are taking place for normal economic reasons. As the patterns of urban and rural development change, it is necessary to have new outlets to retail beer. There are always changes in the industry, and there is always a need to change the location of public houses. Some pubs are more viable than others which fall out of favour.
Some weeks ago I was in an old dockland area in Salford where there no doubt used to be many old broken-down, sawdust-floored pubs which have now gone. The pubs there now are very posh and provide an upmarket service. I am sure that the relationship between tenant and brewer will be different in that area now. The brewer will have a different attitude to the location patterns of pubs and whether directly to manage pubs or to have tenanted houses or free houses. The type of tenant who might be able to face the new challenge in that part of Salford might be quite different from the tenant who originally took the house. So changes are taking place, and I recognise that.
However, other changes are taking place in the industry which are not due to everyday economic circumstances, but because of the Monopolies and Mergers Commission, and the fact that it pointed out that competition was crucial to the industry and that because of the complex monopoly position that competition was not present—the brewers were making excessive profits and the consumers were paying excessive prices. All sorts of examples have been quoted to show that.
The Government then introduced regulations that in some cases changed the relationship between the brewer and the tenant of the pub. Some of the regulations were supported by the Opposition when they were debated in the House in December, but we felt that we could not give 28 our support to others. The Opposition put forward a number of counter proposals which the Minister, in his wisdom, was not able to accept. In the light of what has happened since December, perhaps the Minister will want to reconsider what has happened in the industry, particularly in relation to one case which I shall cite which illustrates one of the major changes taking place.
If I were of a mind, and if the House was sufficiently tolerant to allow me to do so, I could speak for a considerable time on the number of changes, but I hope that it will be sufficient for me to highlight four significant changes in the relationship between the landlord and the tenant during the past few months. All these changes, I believe, are a direct result of the Monopolies and Mergers Commission's report and the orders passed in the House in December. They are all relevant to different parts of the market place, and I believe that they all demonstrate the weakness of the tenant's position.
Courage and Grand Metropolitan are both large concerns, and both traditionally own both brewery and pub interests; some of the pubs have been directly managed, others tenanted. Courage has 5,002 pubs in this country, 3,673 of which are tenanted. The current bilateral relationship between Courage and its tenants has been established over a period, sometimes through negotiation with trade unions or the National Licensed Victuallers Association.
Those pubs are about to be transferred in a swap arrangement to Grand Metropolitan, which has different contractual arrangements with its tenants. Although there will obviously be some overlap, Grand Metropolitan's general approach to marketing may prove entirely different from the approach adopted by Courage in recent months. The tenants now face the difficult decision whether to accept new contracts. Initially Grand Metropolitan will be bound by the contracts that it has inherited, but as their tenancies come up for renewal tenants will find themselves faced with new terms and conditions that may be entirely different from those of Courage, and will thus be placed in a vulnerable position: Grand Metropolitan may have its eye on another market place. According to evidence accepted on both sides of the House, most tenancies are for three years or less, so the tenants will have to face their new circumstances fairly soon.
Another example is Scottish and Newcastle, which occupies a different sector of the market. The company was originally one of the big six, but, under the new arrangements following the adoption of the orders in December, any company with fewer than 2,000 pubs became bound by less severe regulations than those with more than 2,000; indeed, in most cases they were bound by no regulations at all. Scottish and Newcastle has 2,287 pubs. Rather than face up to its new responsibilities, the brewery intends to dispose of 250, which means that tenants will either be bound by a new contract with the new owners, or will end up out of work because of the closure of their tenancies.
The changes will affect not only the major sector of the market —or even the regional sector of which Scottish and Newcastle probably considers itself a part —but the small sector. Fuller, Smith and Turner, a London brewery, has 120 pubs of which 92 are tenanted. It has already told its 29 tenants that, because of the change in the regulations, it intends to draw up new contracts, not for some of them—as Scottish and Newcastle has done—but for all of them.
Mansfield brewery, in a more rural market, has 306 pubs, of which 196 are tenanted. It has said that it will introduce new contracts as the old ones expire, involving different terms and conditions. That, too, is a result of the changes in the Monopolies and Mergers Commission report.
Dramatic changes are taking place. An editorial in Brewing Review suggested that they are more dramatic than any changes that have taken place in the industry for many years. This is at a time when the regulations and the law governing the relationship between landlord and tenant are changing. It is therefore crucial to get the balance right and ensure that there is equity and power sharing between the landlord and the tenant.
Amendment No. 3 is the key amendment. It will determine whether the Government have introduced fair and balanced legislation that will improve competition and give everyone a bit of the action. If the amendment falls, brewers will have all the power and will begin to put undue pressure on their tenants, and the Bill will be innocuous and spineless. Competition in the industry will suffer as a result of an already complex monopoly becoming an even more complex monopoly.
§ Mr. Dixon
Is not one of the problems that, by July 1992, 10 per cent. of the tenants will fall foul of the measure? We tried to resolve the problem in Committee, but the Government resisted our amendment, which we withdrew after the Minister's reply. It is important to point out that July 1992 is the operative date when brewers will be able to put pressure on tenants.
§ Mr. Henderson
I thank my hon. Friend for raising that point. It suggests that the Government have not been selective in refusing to give way. They have refused to give way on numerous proposals that have been made, in the House and in Committee, both by Opposition Members and by those who support the Government.
If the House believes that the measure should lead to fairness and a balance of power, the different relationship between a pub landlord and a pub tenant and between a shop landlord and a shop tenant should be recognised in the legislation. Great changes are taking place in the industry. We need to achieve the right relationship so as to ensure that the tenant has appropriate power. If the Government do not accept the amendment, the legislation will be completely worthless. Even at this late stage, I hope that the Minister will accept the argument that has been advanced not only by the Opposition but by Conservative Members.
§ Mr. Stan Crowther (Rotherham)
First, I have to declare an interest. I am the parliamentary adviser to the National Licensed Victuallers Association.
This matter was debated in Committee, but it is right to air it again on the Floor of the House. My hon. Friend the Members for Newcastle upon Tyne, North (Mr. Henderson) has already pointed out that it is crucial to the effective operation of the Bill.
All hon. Members believe that the Government are moving in the right direction by extending the Landlord and Tenant Act 1954 to licensed premises. The difference between the Opposition and the Government is over whether their laudable intentions will be frustrated if the 30 contracting-out provisions are allowed to apply to licensed premises. Many Opposition Members believe that they will. As my hon. Friend said, the measure provides for contracting-out if the landlord and tenant agree and if they can obtain the consent of the court.
In nine out of 10 cases there is no incentive for the landlord or the tenant to wish to contract out. The owner of a butcher's shop, a draper's shop or an office block is quite content to receive his rent, subject to the proper reviews, and, as long as the premises are properly maintained, he has no further interest in the business. He is not manufacturing the goods that are being sold in the shop. That is the essential difference between those premises and licensed premises as, clearly, a brewery company owning a tied house has a direct interest in the business which the tenant is running in those premises. In those circumstances, it may well be that the landlord company does not wish to be restricted even by the modest protection that the Bill will provide for the tenant. If a company does not wish to be so restricted, it has only to require the tenant to agree to contract-out.
It is nonsense to suggest that a tenant who wishes to renew his existing tenancy under a new agreement, or a would-be tenant who wishes to enter the licensed trade for the first time, is in an equal negotiating position with the landlord. Of course he is not, because the landlord owns the premises. If the landlord decides to contract-out, it is no good the tenant saying that he does not wish to contract-out because he simply will not have his tenancy renewed or if he is a newcomer, he will not get the tenancy in the first place. That is at the heart of the problem.
The Monopolies and Mergers Commission recommended that contracting-out should not be permitted for licensed premises. Having made it quite clear that it 'was considering the matter in terms of competition, it stated in paragraph 12.138:We have set out in some detail our view that the tenants of on-licensed premises are not, under the present arrangements, able fully to act as independent businessmen".It continued in paragraph 12.141:we recommend that there should be no right on the part of the parties to contract out of the provsions contained in Part II of that Act, except for a preliminary period not exceeding one year.It was quite clear that to improve competition and enhance the position of licensees as independent business men, contracting-out of the Landlord and Tenant Act should not be allowed in that type of business.
The Opposition and the National Licensed Victuallers Association think that the former Secretary of State Lord Young got it right when he said that he was minded to implement that and other recommendations of the Monopolies and Mergers Commission. He was certainly wrong about some other recommendations, but he was undoubtedly right about the narrow section of the report that related to the rights of tenants, the protection of tenants and the relationship between tenants and landlords.
It is interesting that the Opposition seek to further the Government's alleged competition policy and their policy of protecting the interests of small businesses, and the Minister is opposing that. It is ironic, but it is a fact. The Opposition are on the side of the small businesses and, unfortunately, the Government are on the side of the big businesses, and, in the case of a conflict, the rights of the small businesses —the tenant licensees —will not be protected.
31 We are entitled to ask why the Government did that complete about-turn. The then Secretary of State said that he was minded to implement those recommendations, yet within a few weeks he changed his mind. He decided that the extra protection for tenants that the Monopolies and Mergers Commission had recommended should not be implemented. Since then, we have been told of the reason for that. The Brewers Society and some brewery companies told Ministers that they did not like that proposal. That much was made crystal clear in mid-1989, long before the Bill appeared.
There are several other proposals that the brewers do not like, but nevertheless the Government will proceed with them. The large brewers are not happy about the disposal of many tied houses, and weakening the tie among those that remain. Why are the Government proceeding with the proposals that brewers do not like —tied houses, guest beers and so on —but dropping the proposals on the protection of tenants?
That is clearly an example of sweetening the pill. Brewers will have a bitter pill to swallow, but it appears to me that Ministers believe that by abandoning the proposal to give tenants additional protection that bitter pill will be sweetened. The Government are sacrificing the interests of tenants, who have been made pawns in this high-powered game between the Government and the brewers.
I am convinced that many brewers will not insist on contracting-out, and I have been assured on that point by several representatives of large breweries, but the fact that the Brewers Society has insisted that the contracting-out provisions remain in the Bill must mean that in certain cases brewers intend to use them. Otherwise, there would be no point in its insisting that those provisions should remain in the legislation.
I do not doubt the good faith of the Under-Secretary of State for Corporate Affairs. I am convinced, and have been throughout, that, within the constraints imposed on him, he is anxious to do his best for his tenants. I should welcome his assurance that contracting-out will be closely monitored. I shall start that sentence again when the hon. Member for Derby, North (Mr. Knight) has stopped talking to him. Will he assure us that he will monitor contracting-out and that if it appears excessive he will consider introducing new legislation to stop it?
That is a fair request, because if contracting-out takes place on a significant scale the purpose of the Bill will be destroyed. I am sure that the Under-Secretary is anxious to see the Bill operated properly and to ensure that the protection that he wishes to provide tenants is in place. I am, therefore, sure that he would not be happy if contracting-out took place on a large scale. I hope that he will assure us that the position will be monitored and that if there is an abuse of contracting-out new legislation will be introduced.
§ Mr. Ivan Lawrence (Burton)
This classic issue presents itself repeatedly and involves the difference between the requirement for more competition and freedom, which will stimulate more business and industry, and the requirement to protect the weaker party. It arises particularly in landlord and tenant legislation and it is what the tenant protection elements of the law have been all about for 32 many years. By and large, there is a tendency to err on the side of the tenant and to protect his interests against those of the landlord. Successive Governments, including the present Conservative Government, have operated in that way, but some of us believe that the protective elements tend to frustrate the purpose of the new laws.
I do not share the view of the hon. Member for Rotherham (Mr. Crowther), who represents certain interests, that this is a sinister arrangement to sweeeten the pill for the brewer. As I represent the brewing centre of England and, of course, have a well-known and declared interest on that industry's behalf, one would not expect me to accept the view that the brewers aim to exploit tenants by including in the Bill a provision whereby brewers can easily opt out of the restriction.
From time to time, there will be a temptation to take advantage of the contracting-out provision. That is human and business nature. The Monopolies and Mergers Commission reached that conclusion in its report. This issue is a potential irritant between landlord and tenants. In a sense, I am speaking on behalf not of the great brewers of Burton upon Trent but of the licensees, the tenants of the great public houses, as the weaker party to the contract. I therefore have a common cause with the hon. Member for Rotherham.
The Government should build into the Bill a mite more protection for the licensed victualler —the tenant. I make that claim because it would be better for the relationships that are to exist between landlord and tenant. The tenant should not think that a provision in the legislation will work against his interests. I also make that claim because the Government would not wish to be seen to introduce a measure erring on the side of the brewer and against the tenant. Peculiarly, perhaps, I thus find myself speaking against the interests that I normally represent. Not all the brewers in Burton upon Trent are big —there are some very small ones such as Burton Bridge and Heritage.
In order that justice may be seen to be done, any temptation to think that the contracting-out provisions are built in for the benefit of the stronger party should be mitigated by more action than is shown in the Bill. On balance, the Government should take seriously the amendments that have been tabled and be prepared to amend the Bill, although perhaps not precisely in those terms, to give more confidence to licensees. I know the brewers in my constituency very well and I can state that view, knowing that it is not their intention to exploit licensees. It may not, strictly speaking, be necessary to make such a change in the Bill but so that everybody may confidently believe that the Bill is even-handed and will protect licensees, I ask that the proposed change or a change approximating to it should be introduced.
§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood)
I have listened carefully to the arguments advanced by the Opposition and by my hon. and learned Friend the Member for Burton (Mr. Lawrence). I shall deal with some of the points that they made and then state the Government's position on this important subject.
It is true that the Landlord and Tenant Act 1954 arose out of the rebuilding of urban areas —against a different background. But the important clause in the Bill is based on legislation introduced by the Labour Administration in 1969, against a very different background indeed, and I think that the reasons given by that Labour Government 33 hold true today. The Labour Government were concerned about the impact on the availability of business accommodation that would follow if a contracting-out clause were not introduced. The then Solicitor-General made the matter clear:one must hold a balance between what is needed for the effective protection of tenants and what would fetter freedom of contract to such an extent that lettings were discouraged and worthwhile accommodation left unoccupied."—[Official Report, 24 June 1969; Vol. 785, c. 1424.]That is the nub of our case. The Government accept the wisdom of the Labour proposal in 1969, which created a balance in tenants' and landlords' rights that has lasted for the past 21 years and which will now be applied to include brewing landlords and their tenants, too. The provision was based on an independent study from the Law Commission, which also expressed its fears about the non-availability of tenancies. It was against that background that the 1969 amendments to the 1954 Act were made.
The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) rightly said that the issue before the House is whether we have struck the right balance between landlords' and tenants' interests. The House is united in wanting to achieve a fair balance between landlord and tenant which provides something in the commercial arrangement for the benefit of both parties so that enough tenancies are available. The Government contend that that is best supplied in the form of the balance in the 1954 Act as amended in 1969.
The hon. Member for Newcastle upon Tyne, North also asked the important question whether undue pressure could be exerted on tenants as a result of the contracting-out proposal. It may be helpful if I remind the House how the contracting-out proposal works. Tenant and landlord have to go jointly to the court and seek its permission to have a contracted-out tenancy under the 1954 Act. That is, in itself, a protection against the very kind of undue pressure against which hon. Members wish to guard. The landlord and the tenant need to take separate legal advice from their lawyers and to go to court, and —among other things —the court must satisfy itself that both parties to the agreement know what they are entering into and understand the basis on which they are making their joint application. That is an important safeguard built into the judicial process relating to contracting-out.
§ Mr. Lawrence
My hon. Friend is quite right that there is provision for taking legal advice on going to court, but that can only make a licensee aware of what his rights are; it will not affect the pressure that may be placed on him to go ahead with the matter even though he knows what his rights are. That is what bothers hon. Members on both sides of the House. It is one thing not to know one's rights; it is another to know one's rights and not to want to act because one feels that one is under pressure.
§ Mr. Redwood
I think that my hon. and learned Friend agrees that there is an important safeguard against a tenant unknowingly entering into a contract agreement because he has not been properly advised or there is not a formal process.
§ Mr. Barry Field (Isle of Wight)
I apologise for not being present throughout the proceedings, but the Isle of Wight ferries were delayed by the severe weather. The Isle of Wight licensed victuallers association is worried about this point. As my hon. Friend knows, my hon. Friend the Member for Portsmouth, South (Mr. Martin) and I have the largest number of tied houses in the Whitbread brewery. The association is concerned that both new and existing tenancies may be put under considerable pressure, particularly when they take in host beer. Will the tenants negotiate as individuals? If so, they will face the considerable power of a large company. Surely that does not put tenants in a good position.
§ Mr. Redwood
The contract is entered into freely between two parties and the balance of power depends on the individual strengths of the local markets and the circumstances at the time.
§ Mr. Redwood
If I may, I shall deal with one point at a time. That may be helpful to the House and it is difficult to deal with three at a time.
The tenant will have the advice that he wants, for example, from the NLVA, which is diligent and helpful, and from his legal adviser. The worry is that if such an arrangement is not allowed, many people who want tenancies simply will not be able to get them. We should remember that the Monopolies and Mergers Commission exempted the first 12 months in its recommendation, specifically because many people who want to become tenants will have no track record and, therefore, will be unlikely to qualify as tenants, so a trial period is needed for them to introduce themselves to the brewers and for the brewers to make an assessment. Unfortunately, if that is only for 12 months and not thereafter, the market will become ossified and many subsequent potential new entrants will not have the same facility as those in the 12-month period.
§ Mr. David Martin (Portsmouth, South)
Can my hon. Friend deal with the fear that, although there is contracting-out, if third parties or a potential tenant does not agree to contract-out, a landlord will be inclined to find someone who will and say to the others, "If you won't, they will, so I will give it to them"?
§ Mr. Redwood
The purpose of the legislation is to give tenants greater security of tenure. The House is losing sight of the fundamental reason why the House is united on the principle of extending landlord-tenant protection to those categories of tenant. It would not be possible for a brewer to force out a tenant on that basis, unless he could terminate the tenancy for one of the restricted reasons given in the landlord and tenant legislation. That is protection which tenants do not have now which is why the NLVA urged me to introduce the Bill as soon as possible. The Government have introduced it at the earliest available opportunity to extend that protection as soon as the Bill can receive Royal Assent and the due number of weeks have passed for it to come into effect.
§ Mr. Crowther
Will the Minister address the following scenario? A tenant, who has been running his business for a long time and has developed a good business, even without the benefit of landlord and tenant legislation 35 protection, may think that because this Bill is passed he will have protection under this legislation. When his existing tenancy expires, he will start talking to the landlord about his new tenancy which he will expect to be covered by landlord and tenant legislation protection. The landlord will say, "Hang on, I have decided that we shall contract-out." The tenant will say, "Surely a new Bill has gone through Parliament." The landlord will say, "I cannot help that. You will agree to go with me to the court and seek consent for contracting-out. Otherwise, your tenancy is finished and I shall find a new tenant." How will that problem be overcome? That is most worrying and I should like the Minister to comment on it.
§ Mr. Redwood
The purpose of the legislation for all the tenancies covered by it is to necessitate, for the first time for pub tenancies, that a landlord has one of a limited number of reasons for terminating a tenancy. That is why the extra protection is being granted by the legislation. That is the point of it.
§ Mr. Matthew Taylor (Truro)
I took an office in my constituency under precisely those conditions, with an opting-out clause. I had no choice as the landlord insisted on that, so I went along with it. For an office, that does not matter that much, but for a tenancy the entire living depends on the location. The Minister is saying both that tenants need protection against landlords who may not operate fairly, and that protection should be removed for precisely those landlords against whom the tenants need protecting.
§ Mr. Redwood
I am not doing that. The legislation will provide the protection that all hon. Members want. After that, where the case is governed by the legislation, there will be a limited number of circumstances in which the tenancy can be terminated. That is why everyone agrees that we should extend that protection. It is rather similar to the good debate in Committee on the question of the widows' year and the protection for them. We all agreed that a widow should not be driven out of the tenancy on the death of her husband. However, the protection offered in the legislation is more generous and comprehensive for the widow, if she is the nominated successor of the deceased publican, than would have been the case under the amendments proposed in Committee, which is why I did not accept them. It is not that I wish widows to end up on the streets, but that I believe that the balance of legislation offers them a better break than the more limited proposal in the amendment. There is a great deal of good news in this legislation. The Government are pleased to be introducing it and I know that it is welcomed by tenants, as the hon. Member for Rotherham (Mr. Crowther) kindly said. That is the basis of the settlement.
I wish to deal with points that are relevant to the amendment. First, the Government are concerned not to reduce the number of tenancies available by introducing the wrong type of legislation to govern tenant security. One of the consequences of the Opposition's proposal is likely to be a reduction in the number of tenancies. That would be bad news for a number of people who would like to become tenants, and even for those who are already tenants. It might intensify the search for gateway exits by the landlord breweries for certain tenancies.
36 Secondly, the amendment would be especially harsh on the untried entrant —the person who wishes to enter the pub trade and who may turn out to be a good landlord, providing more life and change in landlord-tenant business. Without that type of contracted-out tenancy arrangement, it would be difficult to have the right number of new entrants coming forward, and thereby allow brewers to give them the opportunity to prove themselves.
Thirdly, there is a code of practice operated by the Brewers Society, which I know the hon. Member for Rotherham has welcomed. It will continue to be used by many reputable brewers, in addition to the provisions in the legislation that will become legally binding.
I was interested to hear what the hon. Member for Newcastle upon Tyne, North said about new developments and changes in the type of pubs on offer within new town centres. The hon. Gentleman makes my fourth point for me. It is because it is a changing industry where the location and style of pubs are changing, and new pubs are becoming available in new types of development, that there needs to be some flexibility to allow new entrants and those who wish to experiment with a different style of tenancy within the pub framework. That may necessitate different marketing and a different approach to the business. That is what the provision in the Law of Property Act 1969 facilitates and permits.
I cannot agree with the hon. Member for Newcastle upon Tyne, North that amendment No. 3 is the key amendment by which to judge the legislation. I read in the Morning Advertiser on 26 February that three matters were crucial to the test of the legislation and that there would be an opportunity to debate all of them on amendments today. It referred to the inclusion of a right-to-buy clause, and the introduction of the widows' year. The hon. Gentleman might concede that his amendment is not the crucial one by which to judge the balance of the legislation. The hon. Gentleman is nodding, so he is taking back his words. There are a number of ways to judge the balance in the legislation between landlords and tenants.
§ Mr. Henderson
Does the Minister accept that, of the amendments that we tabled, No. 3 is the key one? Had other amendments been called that would still have been so. I had hoped that the Minister recognised from the contributions of some of his hon. Friends that if the amendment is not accepted many of the other provisions in the Bill will be meaningless. That is the point we have tried to establish.
§ Mr. Redwood
Therein lays the disagreement between us. I do not believe that the amendment is a key one in relationship to the range of amendments looked at in Committee. This is an important debate, but it is not the most important, over and above the other amendments examined.
I was disappointed that the Opposition did not table new amendments in the light of our debates in Committee. I felt that we had a good Committee stage, that we made a lot of progress, found some common ground and identified some problems. I thought that the Opposition would introduce new amendments that addressed what the Committee had debated. Instead, we are faced with amendments that were debated extensively in Committee. 37 Those amendments were considerably damaged in Committee because they did not make sense in relation to the balance in the landlord and tenant legislation.
§ Mr. Redwood
If I thought that there were things that needed varying in the balance of the legislation I would have introduced amendments today. If the hon. Gentleman refers back to the text of our Committee proceedings he will see that in a number of important respects, such as the widows' year and the right to buy, the amendments tabled did not offer anything above what already existed in legislation or in the framework that governs the relationship between the landlord and tenant. That is why I am happy with the Bill and recommend it to the House.
I suggest that the House votes against the amendment, as it would not improve the Bill and would make life a lot more difficult for many people who want to become the tenants of brewers.
§ Dr. Lewis Moonie (Kirkcaldy)
I submit that the Government's position on this Bill is clear—not for the reasons suggested by the Minister —as they are prone before the brewing interests. Today those interests have been much more fairly represented than those of the tenants.
The amendment concerns contracting out of the Landlord and Tenant Act 1954. My hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) is right in saying that the world has changed in the intervening 35 years, but, sadly, some things do not change—for example, the desire of the stronger partner in any agreement to obtain more than his or her fair share of influence over it. There is a strong desire to put one over on the other participant. The Bill fails to address that problem. That is its fundamental weakness and why we tabled the amendment.
We believe that the balance of interest must be maintained, particularly, as my hon. Friend the Member for Newcastle upon Tyne, North has said, at a time of great change in the industry. It is facing a major reorganisation and we remain convinced that it will not benefit the tenant licensee.
My hon. Friend the Member for Rotherham (Mr. Crowther) is well known for the vigour with which he promotes the case of the National Licensed Victuallers Association. He is also well known for the forthright way in which he declares his interest in any matter on which he speaks to the House. I wish that his example was followed more widely.
My hon. Friend has quoted several detailed examples of the fears that contracting-out raises in the minds of tenants and their representatives. I do not intend to cite any more evidence in support of our case today as I believe it has been proved.
My hon. Friends and I are not minded to accept the Minister's lightly given assurances. We shall press the amendment to a Division because of the Minister's failure to produce any evidence to show that both parties will benefit from the contracting-out provisions.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 64, Noes 160.Division No. 9639
|Division No. 96||[4.44 pm|
|Allen, Graham||Hughes, Simon (Southwark)|
|Alton, David||Jones, Barry (Alyn & Deeside)|
|Archer, Rt Hon Peter||Kaufman, Rt Hon Gerald|
|Armstrong, Hilary||Kennedy, Charles|
|Barnes, Harry (Derbyshire NE)||Kinnock, Rt Hon Neil|
|Barron, Kevin||Leighton, Ron|
|Blair, Tony||McKay, Allen (Barnsley West)|
|Brown, Gordon (D'mline E)||McWilliam, John|
|Caborn, Richard||Marek, Dr John|
|Campbell-Savours, D. N.||Meale, Alan|
|Carlile, Alex (Mont'g)||Michael, Alun|
|Cartwright, John||Moonie, Dr Lewis|
|Clark, Dr David (S Shields)||Morris, Rt Hon A. (W'shawe)|
|Cohen, Harry||Mowlam, Marjorie|
|Coleman, Donald||Mullin, Chris|
|Corbyn, Jeremy||O'Neill, Martin|
|Cox, Tom||Pendry, Tom|
|Crowther, Stan||Pike, Peter L.|
|Cunningham, Dr John||Powell, Ray (Ogmore)|
|Dalyell, Tam||Prescott, John|
|Davies, Ron (Caerphilly)||Redmond, Martin|
|Dixon, Don||Reid, Dr John|
|Doran, Frank||Richardson, Jo|
|Eastham, Ken||Rooker, Jeff|
|Fisher, Mark||Ruddock, Joan|
|Foster, Derek||Skinner, Dennis|
|George, Bruce||Smith, Rt Hon J. (Monk'ds E)|
|Golding, Mrs Llin||Steel, Rt Hon Sir David|
|Hardy, Peter||Taylor, Matthew (Truro)|
|Haynes, Frank||Williams, Rt Hon Alan|
|Heffer, Eric S.|
|Henderson, Doug||Tellers for the Ayes:|
|Hogg, N. (C'nauld & Kilsyth)||Mr. Tony Banks and|
|Hughes, Robert (Aberdeen N)||Mr. John Cummings.|
|Alexander, Richard||Devlin, Tim|
|Alison, Rt Hon Michael||Dickens, Geoffrey|
|Amos, Alan||Dicks, Terry|
|Arbuthnot, James||Dorrell, Stephen|
|Ashby, David||Douglas-Hamilton, Lord James|
|Baker, Nicholas (Dorset N)||Durant, Tony|
|Baldry, Tony||Emery, Sir Peter|
|Batiste, Spencer||Evennett, David|
|Beaumont-Dark, Anthony||Fallon, Michael|
|Bendall, Vivian||Finsberg, Sir Geoffrey|
|Bennett, Nicholas (Pembroke)||Fishburn, John Dudley|
|Bevan, David Gilroy||Forman, Nigel|
|Bonsor, Sir Nicholas||Forsyth, Michael (Stirling)|
|Boscawen, Hon Robert||Forth, Eric|
|Boswell, Tim||Freeman, Roger|
|Bottomley, Mrs Virginia||French, Douglas|
|Bowden, A (Brighton K'pto'n)||Gale, Roger|
|Bowis, John||Garel-Jones, Tristan|
|Brazier, Julian||Goodlad, Alastair|
|Bright, Graham||Gorman, Mrs Teresa|
|Browne, John (Winchester)||Gow, Ian|
|Bruce, Ian (Dorset South)||Greenway, Harry (Ealing N)|
|Buck, Sir Antony||Greenway, John (Ryedale)|
|Burns, Simon||Gregory, Conal|
|Burt, Alistair||Griffiths, Peter (Portsmouth N)|
|Butler, Chris||Hague, William|
|Butterfill, John||Hargreaves, A. (B'ham H'll Gr')|
|Carlisle, Kenneth (Lincoln)||Harris, David|
|Carrington, Matthew||Hayhoe, Rt Hon Sir Barney|
|Chapman, Sydney||Hayward, Robert|
|Clark, Hon Alan (Plym'th S'n)||Hind, Kenneth|
|Clark, Dr Michael (Rochford)||Hordern, Sir Peter|
|Clark, Sir W. (Croydon S)||Howard, Rt Hon Michael|
|Clarke, Rt Hon K. (Rushclifle)||Hunt, Sir John (Ravensbourne)|
|Colvin, Michael||Irvine, Michael|
|Coombs, Simon (Swindon)||Jack, Michael|
|Cormack, Patrick||Janman, Tim|
|Cran, James||Johnson Smith, Sir Geoffrey|
|Critchley, Julian||Key, Robert|
|Currie, Mrs Edwina||King, Roger (B'ham N'thfield)|
|Davies, Q. (Stamf'd & Spald'g)||Knapman, Roger|
|Day, Stephen||Knight, Greg (Derby North)|
|Knight, Dame Jill (Edgbaston)||Raison, Rt Hon Timothy|
|Knowles, Michael||Redwood, John|
|Latham, Michael||Renton, Rt Hon Tim|
|Lennox-Boyd, Hon Mark||Rhodes James, Robert|
|Lester, Jim (Broxtowe)||Ridsdale, Sir Julian|
|Lloyd, Sir Ian (Havant)||Rowe, Andrew|
|Lord, Michael||Ryder, Richard|
|McCrindle, Robert||Sackville, Hon Tom|
|Maclean, David||Shaw, David (Dover)|
|McNair-Wilson, Sir Michael||Shaw, Sir Michael (Scarb')|
|McNair-Wilson, Sir Patrick||Shelton, Sir William|
|Madel, David||Shephard, Mrs G. (Norfolk SW)|
|Malins, Humfrey||Skeet, Sir Trevor|
|Mans, Keith||Smith, Tim (Beaconsfield)|
|Maples, John||Stanbrook, Ivor|
|Marland, Paul||Stanley, Rt Hon Sir John|
|Marshall, John (Hendon S)||Steen, Anthony|
|Martin, David (Portsmouth S)||Stern, Michael|
|Maude, Hon Francis||Stevens, Lewis|
|Maxwell-Hyslop, Robin||Stewart, Allan (Eastwood)|
|Mayhew, Rt Hon Sir Patrick||Stewart, Andy (Sherwood)|
|Mellor, David||Stradling Thomas, Sir John|
|Meyer, Sir Anthony||Summerson, Hugo|
|Mitchell, Andrew (Gedling)||Taylor, Ian (Esher)|
|Molyneaux, Rt Hon James||Taylor, John M (Solihull)|
|Montgomery, Sir Fergus||Tebbit, Rt Hon Norman|
|Morrison, Sir Charles||Thorne, Neil|
|Moss, Malcolm||Townend, John (Bridlington)|
|Moynihan, Hon Colin||Tredinnick, David|
|Mudd, David||Twinn, Dr Ian|
|Newton, Rt Hon Tony||Viggers, Peter|
|Nicholls, Patrick||Wheeler, Sir John|
|Nicholson, David (Taunton)||Widdecombe, Ann|
|Nicholson, Emma (Devon West)||Wiggin, Jerry|
|Page, Richard||Yeo, Tim|
|Paice, James||Young, Sir George (Acton)|
|Porter, David (Waveney)||Tellers for the Noes:|
|Portillo, Michael||Mr. David Lightbown and|
|Powell, William (Corby)||Mr. Irvine Patnick.|
§ Question accordingly negatived.
§ Order for Third Reading read.—[Queen's Consent, and Prince of Wales's consent, signified].4.54 pm
§ Mr. Redwood
I beg to move, That the Bill be now read the Third time.
It gives me pleasure to move the Third Reading of this legislation which will represent a major advance in the security offered to tenants. It is part of the package of measures brought forward as a result of the Monopolies and Mergers Commission inquiry into the brewery industry and was designed to give to the tenants of brewers and other pub landlords the same protection as is available to other business tenants.
I know that the measure is welcomed by the National Licensed Victuallers Association and by Members on both sides of the House who wish to see an improvement in the protection of tenants in this important industry. The debates in Committee have been based on an agreement that there should be an improvement in the protection offered to tenants, but there will be detailed debates about the exact nature of that protection, the balance struck in the landlord and tenant legislation and the way in which it might be improved.
I have sought to show in Committee and on the Floor of the House that the well tried and tested balance of this legislation, introduced in 1954 by a Conservative Administration and amended and improved by a Labour Administration in 1969, is the right balance. It will assure tenants that they have reasonable protection of their tenancies and assure landlords that it is still a worthwhile 40 business relationship for them to enter into, so that the supply of tenancies will not dry up. Those seeking to become publicans will thus not be impeded or prevented by over-protective legislation.
During the debate I have been asked by Members to give some assurance about the kind of monitoring that will take place once the legislation has received Royal Assent. I will give two pledges. There will be monitoring of the general balance of landlord and tenant legislation as the Department of the Environment goes about its business as custodians of the corpus of the law and seeing that it is modern and up to date. There will also be monitoring by the competition authorities to ensure that the package of measures presented by the Government to implement the findings of the MMC report have a good impact on the brewing industry as a whole. I have already said to the NLVA that its views will be welcomed through the usual channels if it wishes to make points about the way in which the new settlement for the brewing industry is developing.
§ Mr. Lawrence
I am most grateful to my hon. Friend for that assurance. He may have noticed that I deliberately abstained in the last vote because I was not satisfied that he had given that assurance hitherto. Will he go one stage further? Monitoring is all very well, but if it is discovered that something is going wrong and tenants are being exploited by landlords, will he be prepared to suggest amendments to the legislation to provide the kind of protection envisaged in the Monopolies and Mergers Commission report?
§ Mr. Redwood
I have explained that we must examine the legislation as a whole as it affects all business tenancies. I have also explained that there are a number of safeguards within the structure of that well tried and tested legislation —most notably the fact that the tenant and landlord have to go to court. They must jointly and severally present their wish to contract out of the Landlord and Tenant Act 1954, and it is that court process which provides the best guarantee that hon. Members seek.
The legislation must be seen against the background of the changes in the brewing industry. A number of changes were under way anyway because of economic change within the industry. The nature and style of pubs are changing. Brewers were looking again at their types of asset portfolios and deciding whether it was right for them to be both brewers and pub owners. The MMC report, which found against the brewers on a public interest basis, has resulted in measures which will serve to reduce and weaken the ties between brewers and their tenants. That is welcomed on both sides of the House as being in the interests of a more competitive industry and of a better deal for the customers of pubs. There may well also be benefits for the licensees themselves, many of whom want parts of the MMC report implemented and have made representations accordingly.
In the course of the debates, the Committee and the House have examined the position of widows. I said a few minutes ago that the Government were anxious to see that widows were well protected. I repeat that under this legislation they will be able to take over tenancies from their deceased husbands if those husbands have nominated them as their successors. Widows will then have all the rights and obligations of the tenancies previously enjoyed by the landlords who predeceased them. That is an important advance for widows in the industry, which is 41 distinct from some other sorts of business tenancy in that the business will also often be the living accommodation of the tenant concerned.
The Opposition have raised the issue of the right to buy. In their proposals on that right they limited themselves to the idea that in a limited number of cases there would be an explicit legal right to buy at best price by the tenant. The Government welcome the opportunity for tenants to buy their pubs, but it is in the commercial interests of the brewer to sell his pub for the best price. I am sure that many brewers thinking of selling pubs will also think of offering them to the tenants and will be open to approaches from the tenants if the latter can come up with the sort of good price that the Opposition had in mind. I cannot see that the Opposition amendment would make much difference to that right. Tenants may well buy their pubs more commonly from their brewer landlords and we should be happy about that if it arose out of usual commercial arrangements within the industry.
Contracting out has been extensively debated and in Committee we also looked into the issue of goodwill. Any departures from the regime identified in the landlord and tenant legislation would require careful consideration as they would affect the delicate balance between landlord and tenant set out in the law. However, I have listened carefuly to the comments in Committee and to other representations on this subject, especially to the argument that publicans should be entitled to compensation at a higher multiplier on rateable value than other tenants as they are usually in the same business as their landlords.
Those are arguments of substance on which I continue to hold an open mind. The representations will need to be considered not only from the perspective of the brewing industry but in the wider framework of the provisions for business tenants in the Landlord and Tenant Act 1954, for which the Department of the Environment has general responsibility. Ministers will be looking at the script of today's debate and the Committee debates for that and for other reasons.
§ Mr. Vivian Bendall (Ilford, North)
I understand that compensation is dealt with by the Department of the Environment, and I hope that it will examine the issue seriously. It was discussed fully on Second Reading and at great length in Committee. Although we should not deviate from the Landlord and Tenant Act more than necessary, this problem must be dealt with because many tenants work in pubs for many years only to find at the end of that time that the brewery can take back the pub and their years of work may have amounted to nothing. If the Department of the Environment could be persuaded to use a higher multiplier, that might overcome some of the objections in this area.
§ Mr. Redwood
My hon. Friend has professional experience in related subjects. He knows that the valuation of goodwill is extremely difficult and to try to incorporate it in the legislation by means of the amendment moved today would be neither possible nor desirable, given the compexities in the legislation. I am grateful for my hon. Friend's comment, but the issue must be examined in the context of level treatment as between different types of business tenancy, and of the balance in the legislation.
By any standards this is the most important advance in tenant protection since the war. The Government are pleased to bring forward this legislation, which was sought 42 by certain Opposition Members as well as by Conservative Members. It was also sought by the NLVA, which has actively put its case across. I hope that I have dealt with the points raised by the Opposition and by the NLVA in its correspondence with many hon. Members. A number of hon. Members have written to me; to list them all would take too long, but I hope that my remarks today and my replies in correspondence will meet their concerns. On issues such as widows' rights, this is an important advance, and I am proud to commend the Bill to the House.
§ 5.7 pm
§ Mr. Henderson
As the House will recall, the Opposition originally intended to support the Bill in principle, as we said clearly on Second Reading. I trust that that impression was reinforced in Committee. Throughout the Opposition have attempted to put genuine points to the Government, of which there were four or five principal ones in Committee.
The amendment that we moved on Report emphasised what we believed to be the key modification required to give the legislation teeth, but throughout our proceedings the Government have put obstacles in our path. The Minister has already acknowledged that there was a good debate in Committee. There were points of agreement, and some new points with which the Government had considerable sympathy were made. But the Minister's praise for his colleagues in Committee has been more generous than his actions. The truth is that this is the same Bill, on Third Reading, as the one which the Government presented to the House.
The Minister has said that the legislation enhancing tenants' protection is one of the most important pieces of legislation for the industry to have come before the House. I agree, but I enter the caveat that it is only potentially the most important legislation. Because of the Government's failure to agree to modifications put forward by hon. Members on both sides of the House, the legislation will be left considerably weaker than would have been desirable —and necessary to achieve unanimous support.
The Government have not listened to the arguments —for example, about the timing of the legislation. If too long a period is allowed in which contracts can be renewed, undue pressure is placed on tenants by brewers to change contracts to the disadvantage of the tenant. That will also be disadvantageous to competition in the industry, and it will ultimately be disadvantageous to the consumer.
The Government have failed to acknowledge the importance of what is referred to as the right to buy. In Committee the Government acknowledged that that issue will rear its head regularly as brewers begin to dispose of tenancies, swap them and seek to change the nature of tenancy contracts. At that time the issue of what happens to the existing tenant will arise. Will he have rights that accrue because of his commitment to the business and the tenancy? In Committee the Government acknowledged that the Opposition proposals about that were limited and related only to a specific proposal where a brewer disposes of a tenancy to a third party non-brewer. It did not cover a brewer disposing of a tenancy to another brewer.
The suggestion advanced by the Opposition in Committee related to the right to buy so that when a brewer feels that there is a need for commercial or other reasons to dispose of a tenancy the person or body that has the first right to buy is the sitting tenant. There was no 43 question of the brewer losing out if that suggestion had been accepted because encompassed in the suggestion was the clear intention that the brewer would get the appropriate rate for the tenancy.
Surely a tenant who has given a lengthy commitment to a business the success of which has been largely, if not solely, due to the efforts of that tenant should accrue some property rights. I hope that the Minister will acknowledge that, and that as the Bill goes to another place he will liaise to achieve modifications to strengthen the legislation. I cannot understand the Government's attitude in this matter. How can they say that a council house tenant can accrue property rights and that the management of a company that is to be disposed of can accrue management rights that would lead to a management buy-out while saying that there is no equivalent accrual for the tenant of a brewery house?
§ Mr. Redwood
The hon. Gentleman seems to be suggesting that there is an absolute right for a management buy-out. There is no such right in business law in Britain. There are voluntary agreements in the same way as there can be voluntary agreements for publicans to buy pubs from their landlords. Business and residential tenancies are on a different basis, and to introduce a right to buy in one sector of the business tenancy market would give rise to all sorts of distortions between this and other types of business.
§ Mr. Henderson
The Minister should have thought about my point before he intervened. We are not suggesting that. The Government have been keen to dispose of public sector investments such as the National Freight Corporation. The first thing that they try to do is to establish that there is a management buy-out right and management is encouraged to come forward with proposals so that it can continue to earn the property rights that it has established through its commitment to the business. It is completely inconsistent for the Government not to recognise that when a brewery is disposing of a tenanted public house property rights should accrue.
What is so different about pub tenants? Do they not want to make a contribution to the success of a business and earn property rights? Should they not benefit from any improvement in a competitive environment? Have the Government moved away from their original position, and are they now saying that they no longer give ideological support to property rights?
When it suits the Government, there is one law for Conservative ideology and quite another when the Conservative party's significant paymasters seem likely to be tied by legislation. Is the relationship between the brewer and the tenant to be linked to the strong support that brewers have traditionally given to the Conservative party? Has Conservative ideology been extended to that front as well? The Government have failed to face the genuine points made about property rights for pub tenants.
We heard in Committee that the Government have sympathy for the widow's clause, or what could be called the Annie Walker clause. The Minister spoke about that today. Pub tenants will be looking for more than sympathy if the existing legislation is the only protection that may be 44 given to a spouse on the death of his or her partner.If there is any argument about the estate, the surviving spouse could be involved in lengthy arguments about its disposal before being able to clarify whether he or she would be able to continue with the tenancy. Suggestions about that were advanced by the Opposition and others in Committee but they were not accepted. If the Government are prepared further to consider the matter and perhaps to talk to their colleagues in another place, protection for a spouse could be built into the legislation. That would eliminate the worry about whether the spouse is to benefit from any of the estate and would make an important contribution to strengthening the legislation.
The Government have failed to listen to arguments about compensation, some of which were advanced vehemently by Conservative Members. It is not good enough for the Minister to say that he has an open mind on the matter. Pub tenants could lose their tenancies because of a change in circumstances faced by breweries, and those people will be looking for more than an open mind. They will seek a firm commitment that in the event of them having to dispose of their tenancies they will get fair compensation. They do not want to be dragged through endless court cases in an attempt to establish that they have a right to higher compensation.
If such court cases ensue, it is clear that the people involved would be unattractive propositions to secure a future tenancy with the same or another brewer. If compensation were automatic it would be accepted by the industry, and when commercial circumstances changed giving rise to a legitimate need for a brewer to dispose of a pub, nothing would be held against the tenant who insisted on receiving the proper compensation. The tenant would be free to secure another tenancy to protect his living. That is important, and it is not enough for the Government to say that they will keep an open mind. It is incumbent on them to make firm proposals.
The Government have also failed Scotland. In Committee it was said that hundreds of tenancies in Scotland are not covered by the legislation. By and large, the same circumstances exist there, although the market in Scotland is dominated by two brewery groups. Tenants in Scotland will look for some protection. I understand the problems of incorporating Scottish measures in the Bill, but I hope that the Government will bring forward other appropriate legislation to protect the industry and the tenants.
I protest about the Government's failure to take account of the arguments in relation to the contracting-out amendment that has just been lost on a vote. It was important in building up comprehensive and balanced legislation that would regulate the industry in the future and would give the tenant the necessary degree of protection, but would not completely hamstring the brewer. It is absolutely crucial that there should be such a provision. It is not enough for the Government to talk about monitoring what will happen and about being prepared to look at the situation in future.
It is quite clear, from the arguments that were put forward in previous debates in this House, that many hon. Members recognise that this is not a question of landlord and tenant going hand-in-hand to court and saying, "Please may we contract out so that we may make our own arrangements?" That is not the way that the world works; certainly it is not the way that the business world works. Inevitably, human nature being what it is, landlords would 45 seek to sign agreements that included provision for contracting out of the legislation, and, through time, tenants who did not accept those clauses would not be offered tenancies.
Another danger is that brewery companies could get together and form an unofficial, informal cartel to protect the interests of the brewer landlord. Increasingly, I believe, tenants would be offered only contracts on a mutually agreed basis that were not covered by the Act. People who know the industry will realise that, inevitably, those contracts would be weaker than contracts signed on a free basis but with minimum protection built in by the legislation.
The real test of the Government's willingness to listen to the arguments at all stages of the progress of this Bill is whether they are prepared to face up to the situation that has been presented in relation to contracting out. If they were so prepared, they would face up to the brewers' lobby. In that case, the silence that the brewers have maintained over recent months would soon give way to an outcry from them. I believe that the Government could have faced that situation and that they could have argued with the brewers that, in order to bring about balance, it was necessary to have a different relationship in respect of pub tenancies from that prevailing in the case of shops. Throughout the discussion of the Bill the Government have had ample opportunity to listen to the arguments, to take heed of the points that have been made, and to make accommodations.
I should have liked to be able to recommend firmly that the Opposition support the Third Reading of this Bill. However, those who have followed the debate will be able to draw no conclusion other than that the Government have not been prepared to listen, that there has been no movement from the Government on the main issues. There has been no movement on the issue of timing, on the issue of the right to buy, on the issue of compensation, or on the issue of protection for spouses. Above all, there has been no movement on the vexed question whether pub landlords and brewers should be able to contract out of the legislation.
Thus, the Bill is left ambiguous, unbalanced, spineless, and stacked in favour of the brewer. There are minor areas in which protection has been achieved for the tenant, but in all the circumstances I have grave misgivings about recommending that the Bill be given a Third Reading. My hon. Friend who will wind up for the Opposition may well be able to assist the House by giving some direction on the matter. I hope that, having heard the debate, he will feel that there would be merit in giving the Bill a Third Reading. However, as I have said, I have serious misgivings about letting the legislation proceed to the next stage.
§ Mr. Ivan Lawrence (Burton)
I think that the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) has gone over the top. Manifestly this is, in essence, a good Bill. It is one that all sides have agreed is necessary and will be for the benefit of the industry. It is about the only good thing to have come out of the whole Monopolies and Mergers Commission report, which the Government adopted too speedily and which will inevitably reduce the number of tied houses—indeed the number of public houses—and may even reduce the 46 number of British breweries as brewers have to choose between the capital value of their manufacturing element and the capital value of their tied house element. Already there are signs that brewers in my constituency are having to reassess their whole contribution to the industry. That is very sad, and it was a bad day when the Government committed themselves to accepting the report.
Today, however, we are dealing with the good aspect of the report—the aspect which gives licensees protection. One must ask whether the Bill is as good as it might be. I think the answer is that it is not perfect but that it is perfectable. I do not for one moment doubt the Government's good intentions. I am grateful to my hon. Friend the Minister for the assurances that he has given in response to interventions by the hon. Member for Rotherham (Mr. Crowther), by myself and, no doubt, by others expressing concern about monitoring.
I do not doubt that, in general, the brewers' intentions are good. After all, the good of the industry is their concern. That means also the good of the tenants, who are a vital part of the industry. If the tenants are unhappy or dissatisfied, the industry will not be so successful or so flourishing as it would be if they were happy. Nor do I share the conspiracy theory so beloved of the Opposition in regard to this and many other matters. But I am sorry that the Government did not feel able to go one small step further and to commit themselves to ensuring that the legislation would not act unfairly against the tenant in that it might result in undue pressure or inadequate compensation.
Here I must ask myself some questions. If I were a tenant, would I feel terribly reassured by the fact that I could get legal advice as to my legal rights? Would I feel terribly reassured by being able to go before a court and ask it to decide on those rights? Would I feel reassured by the Government's undertaking to monitor the Act, bearing in mind that they have given no further assurance? I must ask myself whether, in some circumstances, I might have fears that I could lose my livelihood and that, in the end, I might have no choice about entering into a contract to which I was very much the weaker party, and under which I might lay myself open to exploitation. When, as a hypothetical licensee, I ask myself those questions I have to reply that in some circumstances I might indeed have just those fears.
This is not a matter of life and death. It is not a matter of the utmost gravity. It is not a resigning matter. It is not a matter that will arise very often. However, it seems to me to be one in respect of which good will—in its common-sense meaning, not its legalistic meaning—might bring a more reassuring response from the Government. It would surely be sensible for the Government to show just a modicum more good will and to give that extra reassurance to a very particular kind of tenant—the tenant who stands to lose not only the roof over his head but his very livelihood and who is, therefore, more subject to pressure even than tenants in other circumstances.
Therefore, I ask my hon. Friend the Minister whether he could not, at this late stage—or, if he would have to get involved in too many consultations before giving a commitment, when the matter comes before another place —give an undertaking that the Government will look again at the aspect of good will; that he will give the further reassurance that he will be prepared to act by further legislation if necessary if his monitoring turns up the conclusion that this legislation is not working as 47 effectively, efficiently or fairly as was intended. Perhaps in the Upper House that matter will be given greater consideration. That is the question that I ask of my hon. Friend, who I know as a reasonable, flexible, sensible, understanding and caring Minister. I ask him to give that gentle, insubstantial—except in its effect—assurance that the matter will be further considered when the Bill is presented to another place. If he will do so, I shall give the Bill my wholehearted support and not just my majority support with a minority of dissenting feeling.
§ Mr. Stan Crowther (Rotherham)
I share the disappointment of other right hon. and hon. Members that the Bill reaches Third Reading in exactly the same form that it received its Second Reading. It is most unfortunate that the Government have failed to make even one concession. The Minister said that he has received letters from many right hon. and hon. Members—and no doubt letters from many of his own right hon. and hon. Friends were among them. Apparently, those letters had no more impact than all the arguments made in Committee and on Report. I share the hope that the Minister will introduce improvements to the Bill when it reaches the other place.
The tragedy is that we have totally failed to persuade the Minister that the business in question is unique and has many features that distinguish it from other types of premises. It is irrelevant to say, as the Minister did, that the Bill provides the same protection as that given to other types of business tenants. The tenants of licensed premises operate in wholly different circumstances.
I shall not bore the House by recounting the catalogue of features that distinguish licensed premises. The Minister has already acknowledged one of the most obvious—that in most cases the premises serve as the tenant's home as well as his place of business. That alone is good reason for providing additional protection. Also, the tenant himself must hold a licence, apart from that granted in respect of the premises. I know of no other business in which the individual running it must hold a licence so that his customers can consume on the premises the goods that he sells.
§ Mr. Dixon
Does my hon. Friend agree that the individual can also lose his licence through circumstances beyond his control? For example, a person might come to his public house and cause a disturbance, and the police might then object to the publican continuing to hold his licence—the loss of which would also mean the loss of his livelihood.
§ Mr. Crowther
My hon. Friend is certainly correct. Also, if a licensee loses his premises because of a decision by his landlord, unlike a butcher, draper or grocer, he cannot move into new premises just down the road and open another business. That is because the whole operation is controlled by a licensing system. The licensee of a public house is more vulnerable than an ordinary shopkeeper, which is another reason why he should be given additional protection.
Another unique feature is that the person carrying on the business does not own the goodwill of it. As the Monopolies and Mergers Commission report pointed out, he is very much in the position of being an employee of the 48 brewery. He is there to sell its products—but at the end of the day, there is nothing to cover him for goodwill. The MMC pointed out that people in that situation should be given extra protection, to strengthen their position as independent business men.
It is a question of allowing licensees to compete effectively. I thought that a Government committed to competition would be happy to accept amendments to improve the competitiveness of these small business men. Again, I hope that that argument will be taken into account. All is not yet lost, because the Bill has still to go to another place.
I took the view from the start that we would not be able to amend the Bill through a series of Divisions and that the only hope was to persuade the Minister with our arguments in the belief that he was capable of being swayed by them. We have not yet succeeded in that, but we hope for something in the next few weeks.
I emphasise the point made by my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) that our right-to-buy proposal is narrow in scope, as the Minister acknowledged in Committee. The narrowness of its scope led me to believe that the Government would accept it. It deals only with the situation in which a brewery is proposing to sell a public house to an individual or individual who is not in the brewing business. Only when the pub is going out of brewery ownership do we say that the existing tenant should have an opportunity of buying it at its market value. No one is suggesting that the brewery should lose any money in the transaction—but the man or woman already running the pub should be able to take over the premises if he or she wishes to do so. They may have to borrow the cash, but at least they will have an opportunity to invest in a business that they have been running for a long time.
A classic example of the need for a right-to-buy provision concerns a pleasant little Victorian pub in my constituency called the Butcher's Arms, which I frequent from time to time. Until a few months ago, it was owned by a company which is not primarily a brewery but which has brewing interests through an acquisition. When the tenant heard that the owners had decided to sell his pub, he asked to be allowed to make a bid for it. He offered a reasonable price, and the owners told him, "You'll need to improve your offer a little because you have a rival. If you can make your price a little higher, you'll be all right." The licensee accordingly increased his bid by £10,000 and waited for the result.
He heard the outcome not from the owners but from his rival, who walked into his premises one day and said, "I've bought your pub." That is not a very nice thing to happen to any licensee. After only a few weeks, that same pub is again on the market at a price £45,000 higher than that at which it was sold at the end of last year, which is a 50 per cent. increase. Such incidents are not helpful to the trade and certainly not helpful to a licensee trying to keep his business running while the ownership of his pub keeps changing hands.
I regret that the Minister has been unable to find a solution on compensation. He acknowledges that there is a problem, so I hope that he will find a suitable formula before the Bill goes to the Lords. He says that he still has an open mind, so I hope that he will pay particular attention to the comments of the hon. Member for Ilford, North (Mr. Bendall) in Committee.
49 I thought that the contribution of the hon. Member for Ilford, North was very helpful, straightforward and clear. He spoke on the basis of his long experience. At the third sitting of the Standing Committee he said:The only answer that I can see is for the goodwill to be valued when the tenant first takes the lease and revalued when he goes."—[Official Report, Standing Committee G, 25 January 1990; c. 64.]What could be simpler than that? The Minister says that it would be difficult to write that into the legislation.
§ Mr. Bendall
I consulted the Royal Institute of Chartered Surveyors, which has some knowledge of valuing. There is a problem with valuing goodwill on the way in and the way out. Its suggestion was that the multiplier on the rateable value for pub tenancies should be greater than the multiplier normally afforded.
§ Mr. Crowther
I am grateful for that intervention. I cannot dispute expert professional opinion, but I do not understand why the valuation of goodwill should be terribly difficult at the beginning and at the end of a tenancy, because other businesses are bought or sold on that basis. I should have thought that the use of the multiplier on the rateable value would be a less realistic method, in the sense that it would not take account of the extent to which the business has improved during the time that the tenant was in the premises. Whichever way it is done, there is a case for providing more compensation when businesses are repossessed by the landlord for management. It is a matter of justice.
I accept that there are difficulties, and I do not pretend that it is a simple matter, but, after all, Ministers are in the business of providing solutions. I should have thought that that is the Government's job in such a case. We are talking about justice, and I hope that the Minister will find a way to provide justice in this matter. If he does that, it will be a better Bill than it is at present.
I agree with my hon. Friend the Member for Newcastle upon Tyne, North that at present the Bill falls a long way short of what is desirable. Obviously it is an advance, but not as major an advance as the Minister suggests. It falls down on a lot of matters, and we have done our best to demonstrate how the Bill could be improved. I am sorry that we have not managed to persuade the Government.
I remind the Minister that we are talking about a large number of small business men. I think hon. Members on both sides of the House agree that we should encourage small businesses in every way that we can. More protection is needed for small business men, who serve a useful purpose in the community, than is so far provided for in the Bill.
§ Mr. Simon Hughes (Southwark and Bermondsey)
The House will be aware that I was not selected to serve on the Standing Committee, but I have read the debates, and I want to make a few comments on a Bill which has, as hon. Members have pointed out, reached this stage unamended.
I start with the premise that the Bill was intended to improve the lot of people whose business in the licensed trade is often also their home, and that that is a good thing. I support the general thrust of the Bill. I am glad that the Government will incorporate the licensed trade into the Landlord and Tenant Act, 1954.
I am also reassured by the fact that the concern that I expressed on Second Reading about the widows' year can 50 be properly covered by the general Landlord and Tenant Act provision. That will reassure those widows who thought that they might be threatened, particularly after the sudden death of their husbands who were tenants. I understand that they will have the statutory assurance of being able to succeed to the tenancy, irrespective of the fact that they may have entered into any other apparent agreement that would give them fewer rights. I hope that the Minister will reassure me in his winding-up speech that I have understood the matter correctly. Tenants might have signed an agreement that was short of an opting-out agreement but, on the face of it, appeared to mean that after seven, 14 or 28 days they would no longer be able to remain. They will now be overridden by the statutory provisions of the 1954 Act. If that is correct, it is a good thing, and I welcome it.
I listened to what the Minister said about the period between now and July 1992. In Committee the Under-Secretary confirmed that 90 per cent. of tenancies will fall due to be renewed in the three years between July 1989 and July 1992. Effectively, other than in a few exceptional cases, there will be a complete turnover of tenants during that period. Therefore, there will be an opportunity for all tenancies to be reviewed before the Act bites in 1992.
§ Mr. Redwood
The 90 per cent. figure refers to brewery-owned tenancies. The transitional provisions are such that, if the tenancy comes up for renewal prior to 1992, it will come under the security of this legislation. Tenancies that have not been renewed before 1992 will automatically come under the legislation.
§ Mr. Hughes
I am concerned that a substantial number of tenancies will expire under the present arrangements between the passing of the Bill and 1992 when the Bill bites and will cover them. [Interruption.] The Minister says no. As I understand it, the whole debate in Committee was about whether the legislation should have immediate effect or take effect in 1992. An amendment was tabled to alter 1992 to 1990 so that there would be no gap. The Ministers' argument was that it would be unfair to impose the new regime on people who had entered into a contract before the legislation was passed and therefore it was only right that the new regime to bring licensed premises under the 1954 Act should come into force after a period of time in which many of the people affected would have had the opportunity to enter new tenancy agreements. Although there will be a provision for opting-out, many present tenants whose tenancies will end are unprotected by the 1954 legislation, and they will not have full statutory protection if they enter a new agreement before 1992.
The Minister said that he will monitor carefully what happens. I am concerned that there will be a danger that in the next two years a potentially large number of brewers may want to use the opportunities that they have at present but will not have post-1992. Unless there is a speedy response to any information that comes forward, monitoring will not produce the answers in time to be of use.
§ Mr. Redwood
The two operative dates are July 1989 and July 1992. Between those dates, expiring tenancies come under legislation, but 10 per cent. of brewery tenancies will not have been renewed in the transitional period, and when they come up for renewal either shortly after 1992 or a long time afterwards they will 51 automatically come under the protection of the Act, although the tenancies have not been renewed. Therefore, I do not think that matters are quite as the hon. Gentleman is saying they are.
§ Mr. Hughes
Could the Minister give a figure which he did not give, as far as I remember, in Committee? What percentage of current tenancies held in the whole of the licensed trade will come up for renewal between the passage of the Bill, assuming it is passed in the next few months, and July 1922? Obviously some tenancies must be at risk in that period.
§ Mr. Redwood
I do not think that the hon. Gentleman understands the nature of the transitional period. We estimate that 90 per cent. of brewery-owned tenancies will be protected by the transitional provisions, while the residual 10 per cent. will receive such protection automatically in July 1992. I have no figures relating to the non-brewery tenancies, as they are a much more amorphous grouping, and I understand that there is no easy way of establishing the proportion. Given that the typical brewery tenancy lasts for three years, however, the hon. Gentleman can see for himself.
§ Mr. Hughes
Between now and 1992, when the Act will come fully into force, developments must be monitored responsibly Clearly the most effective monitor is the National Licensed Victuallers Association. I hope that the Minister will at least undertake to ensure that if the association produces evidence of significant "exploitation" by the brewers, he will contemplate prompt legislation. Only a minor amendment would be necessary to protect tenants' rights, and Conservative as well as Opposition Members have asked the Minister for such an assurance.
Clearly, the opting-out provision will increase the NLVA's responsibility; it will be up to those who advise tenants to ensure that they are not dragooned into signing an exemption agreement with the brewery. As the Minister well knows, it is always difficult to go behind the face of agreements. It is difficult to disprove, in law, the validity of a contract that appears to have been entered into on a valid basis. Pressure is imposed behind the scenes, and a document eventually appears detailing an agreement containing an exemption clause, but the events leading up to that agreement may not bear revelation.
Because it will rarely be possible to look behind the scenes, it is vital for us to make it clear that, once the new regime comes into operation with the exemption possibility always there, the NLVA and others who advise licensees and tenants must explain that they need not agree to an exemption. The presumption in the law must be that they will be covered by that law, although if tenants wish to opt out they should be allowed to do so. In some circumstances, of course, the deal that they are offered will be acceptable, but I hope that they will be much more alert to their rights following the enactment of the Bill.
The hon. Member for Rotherham (Mr. Crowther) and others have expressed the hope that the Minister—who has said that he retains an open mind about some aspects of the Bill—will have an opportunity to reflect further when it goes to another place, and will accept the advice from people in the business that tighter protection is required. My hon. Friends and I do not intend to oppose Third Reading; that would remove some of the protection that 52 will be provided in due course, which would be neither in the interests of tenants nor in the general interest. Nevertheless, I hope that the Minister, and those who take charge of the Bill in the Lords, will not assume from the probable lack of opposition to its Third Reading that further improvements are not necessary. As the hon. Member for Rotherham pointed out, we are talking not only about businesses, but about homes and livelihoods: in that regard, licensed tenants are a special category, distinct from others who are protected by the 1954 Act.
§ Mr. Dixon
I whipped the Bill through its Committee stage, and it was a good Committee stage; constructive arguments were put by hon. Members from both sides of the House. The only hon. Member who did not come up with anything constructive was the Minister. Although I was impressed by the number of adjectives used by the hon. and learned Member for Burton (Mr. Lawrence) to describe him, I am afraid that none of them could have come from my mouth, for I am thoroughly disappointed by his failure to accept any of our constructive suggestions.
The idea of the Committee stage, at which amendments were tabled, was to achieve a better and fairer balance, and we attempted to do the same today. My hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) chaired the Committee, and I have no doubt that he, too, is disappointed. We had gathered from some of the Minister's remarks in Committee that the Government would table appropriate amendments on Report.
I have received a letter from a Mr. Aitkenhead, the NLVA's north-east councillor. His observations about contracting-out have been echoed today by hon. Members of both sides of the House. Mr. Aitkenhead's first point is that some amendment to the Bill is vital. He also says that, when brewery companies sell public houses to non-brewers, the sitting tenant should be given the first option to purchase, and I agree with that as well. His third point is:Brewery companies should not take houses back for management without agreeing satisfactory terms with the sitting tenant".The Minister implied that compensation would be considered, and I hope that an amendment will be tabled in another place, although it may not be entirely acceptable to us.
Fourthly, Mr. Aitkenhead suggested that,In the event of the death of the tenant, the interests of the surviving spouseshould be protected. The Minister has said that the existing legislation provides some protection. Unfortunately, however, licensed tenants do not accept that the protection is there. That is why my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) spoke of the fundamental need for the Bill to provide for it. People should not have to refer back to the Hansard report of a debate on 26 February to find out what the Minister said.
In Committee, it was argued that a certain amount of good will was necessary if tenants were to build up a business for the breweries. I hope that the Minister will show some good will himself, and will table amendments in the other place to deal with some of the useful suggestions that have been made today and in Committee.
§ Mr. Michael Colvin (Romsey and Waterside)
I apologise for speaking at such a late stage. As I have a considerable interest in the licensed trade, I came into the Chamber to hear what was being said, and found myself provoked to make a short speech.
I begin by declaring an interest as a licensed trade tenant. I am fortunate enough to have a lease rather than a short-term tenancy. Therefore, I am in a slightly different category from most of the licensees who are members of the National Licensed Victuallers Association, which I advised for some years. The association is now advised admirably by the hon. Member for Rotherham (Mr. Crowther). He acts as adviser to the association rather than as its spokesman. We have to bear in mind Burke's definition. The hon. Gentleman does not speak on the association's behalf in this place, but gives it advice and then makes his own judgment about which line to take.
The debate on the licensed trade and its tenancy arrangements are fundamental to the trade. A licensee is a vulnerable tenant. Should he, for any reason, lose his tenancy, he loses his business and his home. He dispenses alcohol to the public and, therefore, has to exercise with great care a considerable degree of responsibility. There has been discussion for many years about whether licensees should be subject to the Landlord and Tenant Act 1954 or whether statutory backing ought to be given to the code of practice that was drawn up by the Brewers Society. Paragraph 9 of the code of practice would provide them with some security. I am pleased that the Government have seen fit to go down the former track.
A number of hon. Members have referred to compensation for goodwill, a matter which causes me concern. My hon. Friend the Member for Ilford, North (Mr. Bendall) answered that question adequately. If, for reasons beyond his control, a licensee is forced to relinquish his tenancy, he must be recompensed for the important element of goodwill. It has been suggested that the Minister will think again about the matter and that when the Bill is considered in another place their Lordships may also consider that the Bill needs to be amended.
I draw the attention of the House to earlier precedents. The other place has been kind to the licensed trade. Hon. Members will recall that when the Licensing Act 1988 was considered in the other place, amendments were tabled on opening hours on Sundays. They were carried, not just because of the force of the arguments in favour of those opening hours but because the Minister was asleep when the House divided. I shall not mention him by name, but he will be known to hon. Members.
I hope that the sense that has been shown by the other place regarding the licensed trade and the precedents that have been set by earlier legislation will be repeated. Compensation is important to the trade. I hope that that question will be addressed before this welcome measure reaches the statute book.
§ 6.2 pm
§ Mr. Harry Barnes (Derbyshire, North-East)
My hon. Friend the Member for Jarrow (Mr. Dixon) referred to four points that had been raised by the National Licensed Victuallers Association. They have also been raised by local licensed victualler associations. I have been contacted 54 both by the NLVA and the Chesterfield and district body. I have also met the Clay Cross licensed victuallers, who made the same points.
The LVAs believe that contracting-out should not be a condition of granting a new tenancy; that publicans should have the first option to purchase from the brewery; that brewery companies should not take back houses for management without taking into account the goodwill of the business; and that a spouse's rights should be protected. Tenants are in a vulnerable position because of the nature of the business. I intend to refer to additional problems that tenants face.
The enterprise culture has resulted in changes to the licensed trade and the control of public houses. There have been dramatic changes to the terms on which licensees are granted tenancies. Pressure has also been exerted on those who already have tenancies, even when the tenant is doing quite well and is popular in the community. The services that tenants provide are not entirely commercial. Pubs provide a meeting point where people can congregate. It is a form of working-class culture which draws people together. That cannot readily and easily be quantified in terms of the cash element that seems to dominate all decisions.
The changes to opening hours have led to problems for licensed victuallers. Brewers have told tenants when they should open. However, tenants wanted greater flexibility so that they could control opening hours. The result is that their families and the few people whom they employ are being exploited.
A number of tenants will be affected by the poll tax. As they are obliged to live on the licensed premises, those are said to be their sole or main place of residence. That is part of the contract. However, a number of them may have a second home close by. It is a peculiar second home; most people do not have a second home that is only two or three streets away. Tenants make use of their second home and may want to move to it when they retire. It cannot readily be let. However, the community charge provisions mean that poll tax has to be paid both on a three-bedroomed house—the modest accommodation that some tenants may have—and on the licensed premises. Some tenants need to have a second home because of the impermanent nature of the tenancy. It provides a safeguard for them if things go wrong.
§ Mr. Crowther
My hon. Friend has made an important point. Is he aware that at least one local authority has reached the decision, very sensibly in my view, that it is appropriate to levy the poll tax only on the public house and to make no levy in respect of the second home when a tenant is obliged, by the terms of his tenancy or licence, to reside in the public house? I hope that other local authorities will take that sensible decision.
§ Mr. Barnes
That is a valuable suggestion. However, local authorities have to ensure that it does not appear to others that a special group has been exempted. The Government ought to take on board my hon. Friend's point. There is still time for them to write into the Bill a provision that would require all local authorities to follow that course. The Government must ensure that special privileges are not thought to have been granted to one particular group. My hon. Friend's suggestion would allow local authorities to get round that problem.
55 Many licensed victuallers are faced with problems, just because of the kind of community that they serve. At Clay Cross the growing problem of indebtedness in the local community means that public houses are used more at the weekend and are only sparsely attended in the rest of the week. Care should be taken in developing areas that suffer relative deprivation to retain local provisions. A clean sweep, through a commercial approach, might devastate the viability of existing provisions that might be required as part of a growing community. I hope that the special concerns and difficulties encountered by tenants within such communities will be taken into account in the later stages of the Bill.
§ Dr. Moonie
My hon. Friends and I have considered carefully whether to vote against the Third Reading. We are particularly disappointed by the Government's failure to recognise the cogency of our amendments on contracting-out. The Minister listened politely to everything that we and many Conservative Members said, but he did not accept any of our amendments. That is sad, because our motive throughout has been to improve a piece of legislation with which we agree in principle.
I still believe that the Bill has several flaws. However, my disappointment is tempered by the awareness that it will now proceed to another place, where, we hope, older and probably wiser heads than the Minister's will see the merit of at least some of our proposals. Therefore, after due consideration, I have decided to ask my hon. Friends not to vote against the Bill, but to await the outcome of that debate.
§ Mr. Redwood
I was expecting more from the hon. Member for Kirkcaldy (Dr. Moonie). I thought that he might have some new arguments that would shed light on our debate. What a disappointment it was that there was nothing new in his final speech.
The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) graced the House with a rather more extensive resume of some very old arguments that we heard in Committee and one or two new ones. The first was the idea that there was the right to buy for any employee in a Government-owned business. Unfortunately, there is no such right to buy, and nor will there be an intention to provide one by Act of Parliament. There are circumstances, such as those of the National Freight Corporation, where it makes sense for the vendor to sell to the employees because it was a good package and was a way of extending the Government's general policy of more employee ownership which has been reflected in a number of tax changes and other measures. However, there is no right in law to buy any business premises or business from its owners, and to insert one into the law for one particular category of business tenant and not the rest would be extremely skewed legislation. I hope that the hon. Gentleman will do his homework a little better on the National Freight Corporation which, as he rightly hinted, was a great success of the Government's policies which Conservative Members welcomed.
56 The hon. Gentleman then revisited the issue of widows' rights and said that the problem of the protection offered by landlord and tenant legislation was that it did not necessarily mean that the spouse would inherit those rights, as that would require the nomination of the tenant before he dies of who takes over the estate. That is a perfectly good security as there may be circumstances in which, for example, the widow did not wish to take over the responsibilities of running the business and the tenant had decided that it made sense to pass the tenancy to the son who would make sensible provision for his mother while taking over the obligations of the tenancy.
Nor would the hon. Gentleman's suggestion that reduces the protection on offer to the widow cover other relationships within the family—for example, if the publican had a stable relationship with a lady but had not got around to marrying her. He might want to nominate her, and that would not be possible under the hon. Gentleman's amendment.
The legislation presents more appropriate arrangements which allow the tenant to nominate before his death who will inherit that part of his estate. We are creating an important property right which he will pass on to the person of his choice. I cannot accept that it is worthwhile having less protection built into the Bill because of that bogus point.
§ Mr. Simon Hughes
If there is no clear succession, no disputed will, no clear will or no will, is there any way in which an existing spouse, who is the obvious successor and wants to continue running the business, will be protected or will things remain as uncertain for her under those circumstances?
§ Mr. Redwood
I use this opportunity to urge all people who will be passing on that property right to note that they should make sensible arrangements to protect the interests of their spouse. The hon. Gentleman is right that if there is confusion over the estate things will be more difficult. It is not asking very much to say that people should make decent provision in good time for their wives or for other members of their family whom they wish to inherit that right, and it would be common prudence to do so.
I made my position on compensation clear in my response to an earlier debate.
The hon. Member for Newcastle upon Tyne, North spoke about Scotland. He ignored the fact that Scotland has a different brewing and tenancy market from that south of the border. In Scotland, on the latest figures I have available, only 18 per cent. of pubs are brewer-owned, compared with 69 per cent. in England. There is such a big difference because there is a much bigger free trade in Scotland. The hon. Gentleman also recognises that the legislation takes the form of an amendment to an existing piece of legislation to drop an exemption that we consider is no longer right or appropriate. There would be no means by which we could effect the same for Scotland as that would require entirely different legislation that would have to consider the balance of business tenancies across the Scottish economy, because Scotland does not have legislation equivalent to that for England and Wales. There is a different settlement for Scottish regions and that would require looking at afresh. It would be a major task to walk over that ground affecting all business tenancies.
57 We have had a reprise of the previous debate about the nature of contracting-out. I can only repeat the assurances and clarification that I gave then about the procedures that will he followed and the reasons why it was thought to be a good thing when it was introduced in 1969 by a Labour Administration and why we feel that it remains true today for business tenancies in general and for licensed tenancies in particular.
I am delighted that my hon. and learned Friend the Member for Burton (Mr. Lawrence) agrees that the Bill represents a step in the right direction for tenants' rights. I also agree with him that, contrary to the suggestion of Opposition Members, there has been no conspiracy. The balance of rights for tenants has not been reached because the brewers have dictated the terms to the Government. It is the result of the Monopolies and Mergers Commission's inquiry and the Government's view that there needs to be improved protection for tenants and that this was the most straightforward and simple way of bringing forward measures to provide protection as quickly as possible. I am grateful that the Committee did not unduly detain the Bill, because it was an essential part of the package that we get the legislation through in good time so that protection can begin to bite as soon as the Bill receives Royal Assent.
The Government have responded to the lobby of the hon. Member for Rotherham (Mr. Crowther). My hon. Friends, the National Licensed Victuallers Association and I quite agree that tenants need protection quickly and that is why it is going ahead on time.
The hon. and learned Member for Burton—I mean my hon. and learned Friend; how could I be so churlish after what he said about me—asked about goodwill. I can only repeat what I said earlier about the nature of goodwill and the monitoring that the Government and the Office of Fair Trading will undertake in connection with the general legislation for all business tenancies, and the detailed package of proposals affecting the brewing industry, which was regarded as a balanced package extending rights and competition in the industry in the way specified.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) welcomed the good news on widows. I wish that Labour Members would understand that our 58 proposal deals with the problem better than amendment No. 3 would have. I hope that I have clarified for the hon. Member for Southwark and Bermondsey how tenancies will be subject to protection over a phased time period, for which the starting date must be July 1989 because that was when the policy was announced. The terminal date has been judged to be July 1992 because we do not wish the legislation to be retrospective. There must be a cut-off point by which all the tenancies are covered, and July 1992 was our balanced judgment of how to overcome the twin pulls of not wishing to disrupt agreements retrospectively but wishing to have all the protection in place for all tenancies by the summer of 1992, by when the other measures will have come into full effect. We tried to phase the MMC conclusions to ensure advancing tenancy protection at the same time as a growing relaxation of the ties, which have caused other changes.
The hon. Member for Southwark and Bermondsey asked about the turnover of brewery tenancies, which I clarified in an intervention. I repeat that we are interested in monitoring the success of the policy in the ways that I have described.
My hon. Friend the Member for Romsey and Waterside (Mr. Colvin) asked about compensation, which I covered in a previous statement. I hope that my noble Friend the Minister will not be asleep when these measures are going through the other place. I have been attentive: to the debate because these are serious matters which require the full-time attention of the Minister on duty.
The hon. Member for Derbyshire North-East (Mr. Barnes) dealt with issues far removed from the Bill, with his interest in the community charge and the redevelopment of bad areas. I dealt with the hon. Gentleman's general remarks on the four points made by the NLVA before he arrived.
The Bill makes a welcome improvement to tenants' rights. That improvement was sought by all hon. Members, and I strongly recommend that they give the Bill a Third Reading.
§ Question put and agreed to.
§ Bill read the Third time, and passed.